How to Create a Million-Dollar Business This Weekend (Examples: AppSumo, Mint, Chihuahuas)

Share this:

Noah Kagan built two multi-million dollar online businesses before turning 28. He also looks great in orange. (Photo: Laughing Squid)

I first met Noah Kagan over rain and strong espressos at Red Rock Coffee in Mountain View, CA. It was 2007. We were both in hoodies, had a shared penchant for the F-bomb and burritos, all of which led to a caffeine-infused mindmeld.

It would be the first of many.

The matchmaker then introducing us was the prophetic and profane Dave McClure, General Partner of 500 Start-ups, which is now headquartered just down the street from Red Rock.

Mr. Noah has quite the start-up resume.

He was employee #30 at Facebook, #4 at Mint, had previously worked for Intel (where he frequently took naps under his desk), and had turned down a six-figure offer from Yahoo. Since we first met, Noah’s helped create Gambit, an online gaming payment platform and a multi-million dollar business; and AppSumo, loved by entrepreneurs and moms everywhere. He also helped pour fire on both the 4-Hour Workweek and 4-Hour Body launches.

The purpose of this post is simple: to teach you how to get a $1,000,000 business idea off the ground in one weekend, full of specific tools and tricks that Noah has used himself.

He will be your guide…

Enter Noah

For some reason, people love to make excuses about why they haven’t created their dream business or even gotten started. This is the “wantrepreneur” epidemic, where people prevent themselves from ever actually doing the side-project they always talk about over beers. The truth of the matter is that you don’t have to spend a lot of time building the foundation for a successful business. In most cases, it shouldn’t take you more than a couple days.

We made the original product for Gambit in a weekend. “WTF?!” Yes, a weekend. In just 48 hours, some friends and I created a simple product that grew to a $1,000,000+ business within a year.

Same deal for AppSumo. We were able to build the core product in one weekend, using an outsourced team in Pakistan, for a grand total of $60.

Don’t get me wrong–I’m not opposed to you trying to build a world-changing product that requires months of fine-tuning. All I’m going to suggest is that you start with a much simpler essence of your product over the course of a weekend, rather than wasting time building something for weeks… only to discover no one wants it.

I know what you’re thinking: “Yes, Noah, you are SO amazing (and handsome), but what can I do this weekend to start my own success story?”

Here are the steps you can take right now to get started on your million dollar company:

Step 1: Find your (profitable) idea.

At this stage, you are simply looking for something that people are willing to spend money on. So grab a seat and write down a list of ideas that you think might be profitable. If you’re having trouble coming up with ideas, try using the methods below to speed the research process along:

Think of all the things you do on a daily basis. Anything done more than once has potential for a product or service to improve the process. For me, one of those products was a mirror I could hang in the shower. It saves me tons of time while shaving, and now I don’t know how I ever lived without it.

Be cognizant of products you use and frequently complain about. Before Gambit, we were constantly asking our payment tool partners for certain features, yet our requests were always rejected. That was the impetus for us to create Gambit for our own games.

Check completed listings on eBay. This allows you to see how well certain products are selling. It’s also an easy way to measure sale prices of items and gauge the overall percentage of the market that’s receiving bids (i.e. in demand).

Look for frequent requests on Craigslist gigs. These listings are from people actively searching for someone to give their money to in exchange for particular services. Try searching for certain keywords (e.g. marketing, computers, health) and keep track of the total number of results displayed. Evaluate the most popular keywords and see if you can create a product or service around those requests.

Step 2: Find $1,000,000 worth of customers.

Now that you’ve found an idea, it’s time to assess whether there’s a big enough pool of prospective buyers. In this step, you’ll also want to ensure your market isn’t shrinking, and that it fares well compared to similar markets.

For example, let’s say you decide to build information products for owners of Chihuahuas (remember “Yo quiero Taco Bell”?). Here’s how I would check to see if there are enough customers:

1. Search Google Trends for the term “chihuahua” and other similar words (e.g. poodle, dogs) for comparison:

(Click image to expand)

We can see that the word “chihuahua” has a decent search volume (relative to “dogs”), and that “poodle” isn’t as popular. It also looks like the number of searches for “chihuahua” has been relatively stable for the last few years.

Google Insights is great, because it breaks down the search data by location (i.e. what regions the searches are coming from), by date, and what they’re searching for (news, images, products). Click here to see the full report for the above chart.

3. Look at the total number of people available on Facebook for dogs:

3.1 million. Not bad, not bad.

And for Chihuahuas:

84,260 people. Score.

You can also see if there is a large property that you can piggyback on.

Paypal did this with eBay, AirBnb is doing it with Craigslist home listings, and AppSumo looks to the 100 million LinkedIn users. If you can find a comparable site with a large number of potential customers, you’ll be in good shape.

What helped me with finding $1,000,000 worth of customers for AppSumo was studying my successful competitors; specifically, Macheist. Their site did a Mac-only deal that generated more than $800,000. Macheist shares their sales revenue publicly, but you can use your own business acumen on the CrunchBase list to see which business you want to replicate. For instance, you might research Airbnb.com, discover that they have a profitable and growing marketplace, then decide to create a similar service for alternative verticals.

I like to create a Google Spreadsheet of the key numbers for my competitors’ businesses. Below is an example of what that might look like for Macheist in their Mac bundles. [Warning to the haters: This may not be accurate, but I used these numbers just to get a rough idea of the business’ potential.]

Step 3: Assess your customer’s value.

Once you’ve found your idea and a big pool of potential customers, you’ll need to calculate the value of those customers. For our example above, we’ll need to estimate how much a Chihuahua owner (i.e. our customer) is worth to us. This will help us determine the likelihood of them actually buying our product, and will also help with pricing. Here’s how we do that:

1. Find out how much it costs, on average, to buy a Chihuahua (about $650). This is the base cost.

2. See how much it costs to maintain a Chihuahua each year (i.e. recurring costs). Looks like it’s between $500-3,000. For this example, we’ll call it $1,000.

3. Look up their life expectancy, which is roughly 15 years. This is the number of times they’ll have to pay those recurring costs.

Therefore, a Chihuahua’s average total cost of ownership is:

[$650 + ($1,000*15)] = $15,650

Damn… you could buy a lot of burritos with that kind of cash. Silly dog owners.

In any case, these owners are already committing to spend a LOT of money on their dogs (i.e. they are valuable). After putting down $650 on the dog itself and an average of $80/month on maintenance (a.k.a. food), spending $50 on an information product that could help them train their Chihuahua–or save money, or create a better relationship between them, etc.–does not seem unreasonable. Of course, the product doesn’t have to cost $50, but we now have some perspective for later deciding on a price.

Now we need to utilize the TAM formula (a.k.a. Total Available Market formula), which will help us see our product’s potential to generate a million dollars.

Here’s the TAM formula for estimating your idea’s potential:

(Number of available customers) x (Value of each customer) = TAM

If TAM > $1,000,000, then you can start your business.

Let’s plug in some basic numbers to see the TAM for our Chihuahua information product:

(84,260 available customers) x ($50 information product) = $4,213,000

We have a winner!

Okay, obviously you are not going to reach 100% market penetration, but consider the following…

1. This is only through Facebook traffic.

2. This does not include the 5,000,000 monthly searches for “Chihuahua” on Google:

3. This is only for one breed of dog. If you find success with Chihuahuas, you can easily repeat the process many times with other dog breeds.

4. This is only for one product. It’s far easier to sell to an existing customer than it is to acquire new ones, so once we’ve built up a decent customer base, we can make even more products to sell to them.

By all measures, it appears that we have a million dollar idea on our hands. Now we can move on to the final step!

Step 4: Validate your idea.

By now, you have successfully verified that your idea has that special million-dollar-potential. Feels good, right? Well, brace yourself — it’s time to test whether people will actually spend money on your product. In other words, is it truly commercially viable?

This step is critical. A lot of your ideas will seem great in theory, but you’ll never know if they’re going to work until you actually test your target market’s willingness to pay.

For instance, I believed AppSumo’s model would work just on gut-feeling alone, but I wasn’t 100% convinced people wanted to buy digital goods on a time-limited basis. I mean, how often do people find themselves needing a productivity tool (compared with, for instance, how often they need to eat)?

I decided to validate AppSumo’s model by finding a guaranteed product I could sell, one with its own traffic source (i.e. customers).

Because I’m a frequent Redditor and I knew they had an affordable advertising system (in addition to 3 million+ monthly users), I wanted to find a digital good that I could advertise on their site. I noticed Imgur.com was the most popular tool on Reddit for sharing images, and they offered a paid pro account option ($25/year). It was the perfect fit for my test run.

I cold-emailed the founder of Imgur, Alan Schaaf, and said that I wanted to bring him paying customers and would pay Imgur for each one. Alan is a great guy, and the idea of getting paid to receive more customers was not a tough sell :) The stage was set!

Before we started the ad campaign, I set a personal validation goal for 100 sales, which would encourage me to keep going or figure out what was wrong with our model. I decided on “100” after looking at my time value of money. If I could arrange a deal in two hours (find, secure, and launch), I wanted to have a return of at least $300 for those two hours of work. 100 sales ($3 commission per sale) was that amount.

By the end of the campaign, we had sold more than 200 Imgur pro accounts. AppSumo.com was born.

I share this story because it illustrates an important point: You need to make small calculated bets on your ideas in order to validate them. Validation is absolutely essential for saving time and money, which will ultimately allow you to test as many of your ideas as possible.

Here are a couple methods for rapidly validating whether people will buy your product or not:

Drive traffic to a basic sales page. This is the method Tim advocates in The 4-Hour Workweek. All you need to do is set up a sales page using Unbounce or WordPress, create a few ads to run on Google and/or Facebook, then evaluate your conversion rate for ad-clicks and collecting email addresses. This is how we launched Mint.com (see one of our original sales pages here). You are not looking for people to buy; you are simply gauging interest and gathering data.

[Note: With Facebook advertising, $100 can get you roughly 100,000 people viewing your ad, and about 80 people visiting your site and potentially giving you their email addresses.]

Email 10 people you know who would want your pseudo-product, then ask them to send payment via Paypal. This might sound a bit crazy, but you’re doing it to see what the overall response is like. If a few of them send payment, great! You now have validation and can build the product (or you can refund your friends and buy them all tacos for playing along). If they don’t bite, figure out why they don’t want your product. Again, the goal is to get validation for your product, not to rip off your friends.

Of course, there are other techniques for validating your product (like Stephen Key leaving his guitar pick designs in a convenience store to see if people would try to buy them). However, I’ve found these two methods to be super efficient and effective for validating ideas online.

No need to get fancy if it does the trick.

The Final Frontier: Killing Your Inner Wantrepreneur

We made it! You officially have a $1,000,000 idea on your hands and you know for a fact that people are willing to pay for it. Now you can get started on actually building the product, creating your business, and freeing yourself from the rat race!

I can just see it… You’re all nodding and thinking, “Hey, this Noah guy is pretty snazzy!” (Sorry ladies, I’m taken.)

So, what now?

– You are inspired. Check.
– You want to do something. Check.
– You get a link to a funny YouTube video, then you open up Reddit. Check.
– Suddenly, everything you thought you were going to do goes down the drain. Check.
– You and I softly weep. Check.

I want to challenge you! Whoever generates the most profit (not just revenue) within 14 days of this article will win some fantastic goodies. First, here are the basic rules and the process:

– Contest void where prohibited.
– The business/product must be new. This means either a landing page created from scratch using Unbounce or WordPress above.
– Results and proof of some type must be submitted as a comment below no later than 1am PST Saturday on October 8, 2011. Don’t cut it too close; if a timezone misjudgment knocks you out, we can’t make exceptions.
– Put your 14-day profit number (or increase) in the FIRST line of your comment.
– Ultimately, verifiable proof with lower number beats unverifiable proof with higher number.

– $1,000 credit from AppSumo.com
– Roundtrip flights to Austin, Texas to have the most delicious tacos in the world with Noah Kagan, CEO of AppSumo. Sorry, but we can only cover flights within the USA. If you want to hoof it to the US, we can then pick up from there.
– Above all: your $1,000,000 business, of course!

Don’t let this post become another feather in your Wantrepreneurship cap. Just follow the steps and start working towards your $1,000,000 business! Remember, you can start laying the foundation for your product without building anything.

Comment Rules: Remember what Fonzie was like? Cool. That’s how we’re gonna be — cool. Critical is fine, but if you’re rude, we’ll delete your stuff. Please do not put your URL in the comment text and please use your PERSONAL name or initials and not your business name, as the latter comes off like spam. Have fun and thanks for adding to the conversation! (Thanks to Brian Oberkirch for the inspiration)

464 comments on “How to Create a Million-Dollar Business This Weekend (Examples: AppSumo, Mint, Chihuahuas)”

Completely agree with Anthony. This post is one that I find myself rereading often. I’ve read 4HWW and been browsing the web for advice on importing goods from China in order to make my own muse, but without a product idea in mind. I came across this post on assessing the reliability of a manufacturer in China:

Perhaps another way to determine what products are good business ideas is to see what categories or products are listed as best selling on sourcing websites like Alibaba? Similar to what this post says about checking Amazon and Google Searches for popular things.

This has to be one of the best articles I’ve read on taking an idea for and enterprise to making it actually happen. Theres a lot of sound advice and practical ‘how to’s that wouldn’t go amiss in any MBA reading list.
Ive just set-up an App business in Ireland (Appnua.com) and I’ll be applying these principles today along with those I’ve learned in the 4HourWorkWeek.

Agreed, unlike many other articles and posts on the subject, this post is a bit of an all-in-one (an equivalent of series of posts that take you through different tasks) and packed with practical advice that also come from someone as experienced as Noah.

Brice, I’d encourage you to look for the Shopify forum for their build-a-business contest. I believe it’s open to the public, but if not, there’s no harm in signing up for the contest (you don’t pay for the platform for at least 14 days, unless I’m mistaken) just to get access.

“We were able to build the core product in one weekend, using an outsourced team in Pakistan, for a grand total of $60″

I have seen this sort of thing come up all the time, but how does one get in contact with these sorts of programmers? I have a handful of ideas for phone apps and what not to try out, but how should I find the people in these countries that are capable of doing the work?

Does anyone have any advice on this sort of thing? It’s frustrating because I KNOW there are plenty of people in the East who have amazing skill sets with things like programming and are DESPERATE for capital, yet I with capital simply don’t know how to get in contact with them.

Hello Tim,
Thank you for all great tools you have provided specially for promoting and testing ideas. My question to you is, how do we find number of searches on particular item or interest?
For example how did you come up with the number of dog owners and chihuahua and poodles that ultimately used it in TAM formula? could you please instruct me in details how to find out number of searches using the tools you mentioned?
Your response is greatly appreciated. I have both your wonderful books.

I’m wandering how Noah has managed to get 100000 views from Facebook for $100

I spent close to £300 and had 300 views when I ran my first test on Spine Candles… The test couldn’t even be validated because of the small size.

The best value for money came from the feature option on Etsy where my candles are listed. They charge $7 per day per category and return a fair amount of traffic. I haven’t been able to quantify it properly because of the size of organic traffic that Etsy helps to build, but I know I get interest each time I take out that option.

First off, when referring to views he is referring to AD views and not webpage views.

[Note: With Facebook advertising, $100 can get you roughly 100,000 people viewing your ad, and about 80 people visiting your site and potentially giving you their email addresses.]

Notice he says viewing your AD. It sounds like you are not too familiar with cpc (cost per click) vs cpm (cost per impression) advertising. Both have their place. Let me give you an idea:

I set up a simple ad with very generic targeting.

This ad targets users:

* who live in the United States
* age 18 and older
* who are not already connected to (my business facebook page)

Now with CPC a lot of people MIGHT see it (depending on my bid) and I get charged each time they click on it. Recommended bid from facebook is $2.50-$4.00 per click. Now for 80 webpage views that would cost me $200-$320.

Now let’s look at CPM. CPM I bid for 1000 people to see my ad. Facebook suggests that I bid $0.24-$0.43. So, for me to get 100,000 views, it would cost me $24-$43. Remember, you aren’t bidding per singlel impression but per 1000 impressions. Assuming you made a decent ad and have a decent website, a 0.08% conversion rate is not unreasonable.

Of course this is very generic targeting and I would recommending targeting much more specific to keep your conversion/click through rates higher and your cost per sale lower. I would definitely research CPA marketing to get a better grasp of how this works and understand that you can get some very good information/money through this method.

I think that when he says 100,000 views on FB, he is referring to the number of impressions the ad is receiving on FB, not the number of clicks. My guess is that your 300 pounds purchased around 300 actual clicks on your link, and the number of impressions was actually much, much higher. This has been my experience in advertising our local brick & mortar business on FB.

“what do you think when an 18 y/o types a search term and sees your ad and decides to check it out”

You make it sound like all the clicks on Google AdWords are low quality.

Sure, not every click is a winning prospect, but I have generated Millions in revenue from Google AdWords from the relevant clicks I do get.

If I would have taken your advice several years ago to be scared of AdWords I would still be in the rat race. Instead I enjoy a very healthy auto pilot income thanks to Google AdWords.

Don’t be scared of “bad clicks”. If you build poor quality campaigns then you are going to have a bad time. If you take the time and put in the effort to master any marketing medium then you will have a great time once you find your groove.

So I have my idea, I know there is a market for it, what I’m having trouble with is getting it designed & researching manufacturing. Tis a physical product, not a web app. I feel like I’m hitting a wall on this aspect.

@JP Finding the right manufacturer/shipper depends a lot on your product type. If you have a food product, I might be able to help – john @ travelchocolate.com. For other kinds of physical products, you can get designs done at 99designs.com, and for actual small scale start up product manufacturing, try searching “furniture manufacturing in Brooklyn”. You might be able to get started there. Sites like alibaba.com are also helpful, and it seems such providers are best for only large scale production runs. I hope that helps. Thanks John R.

Tim’s previous post (and any other “muse case study” post) features business start-ups with physical products. Most of them mention Alibaba as their manufacturer. I am sure Alibaba assists somewhat in the design. Check those posts out if you haven’t already.

Evan Miller and JP, I’m in the process now, feeling fairly comfortable with the design/manufacture process…Email me, maybe I can help.
(btw, I am NOT selling any services!)
I’m an illustration student in SF that loves creative problem solving!

Try elance for a designer – search for {product} designer and you might get some great results. Typically if you hook up with a great designer, they’ll have connections for manufacturing as well. You could try doing the same search on LinkedIn too.

Hi Hal,
try http://www.allfacebook.com for statistics on FB
But they are referring to the facebook advertising back end/cms system which tells you how many potential customers you will have when setting up an Ad.
Simply go to setup an Ad in FB, enter your audience and demographic and they indicate the audience potential..voila.

This is why this website is so great – there is a generosity of spirit with regard to sharing ideas and strategy. It’s nice to see an abundance mentality. Great article with great practical advice. Thank you.

Dude, I haven’t read this article yet, but I jumped onto your site after finishing “I hope they serve beer in hell” literally 60 seconds ago — you were in the movie as the officer haha! I love that you have the courage to pursue so many of your interests, you’re definitely a source of inspiration for me. Keep rocking Tim!